After testing resistance levels late last week, the USD/ZAR has proven the ability to reverse and sustain a bearish trend.
The USD/ZAR may scare short-term speculators. Recent trading has been choppy, as short-term resistance and support levels continue to attract targeted values like a magnet. Late last week, the USD/ZAR did test higher values, but resistance proved quite capable and a rather solid reversal lower was demonstrated before going into the weekend.
In early trading this morning, the USD/ZAR is again challenging important support levels. The South African rand’s ability to sustain its move to stronger values against the USD and bring into focus the 15.29000 to 15.28000 marks below represenst a significant target for speculators. If the USD/ZAR is able to sustain these low water marks near term, it may cause conservative behavior among traders trying to discern direction.
A cautious approach by speculators with the USD/ZAR is advised at this time. Yes, the Forex pair has enjoyed a significant bearish trend and it is testing important support levels, but there is reason to be skeptical of the South African rand’s bearish surge fundamentally. South Africa remains within the confines of a difficult economic outlook and its government bonds have recently been downgraded by Fitch. However, the trend in Forex remains an important ingredient for all technical traders and many speculators may believe there is more downward momentum that can be attained.
The support level near 15.29000 should be watched closely; if it is broken lower, the USD/ZAR may be able to challenge the 15.21000 juncture. Global risk appetite remains steady and it is within the realm of possibility that international equity indices will see more optimistic buying near term. Yet, the USD/ZAR remains near values which may make some speculators believe another reversal higher may be generated.
Risk management will be crucial with the USD/ZAR, as always. Happily, there has not been volatile price action within the Forex pair recently, but traders should remain cautious regarding the amount of leverage they use via their trading positions. Risk/reward scenarios should be considered carefully regarding the USD/ZAR short term, based on upside and downside potentials.
Speculators may want to actually buy the USD/ZAR near the 15.30000 level and look for slight reversals higher. If the USD/ZAR breaks the 15.29000 support level and traverses below, it could set off fireworks, so a healthy stop loss is recommended if a trader decides to be a speculative buyer short term and go against the mid-term trend.
South African Rand Short Term Outlook:
- Current Resistance: 15.40000
- Current Support: 15.29000
- High Target: 15.46000
- Low Target: 15.21000